ConnectEast (CEU)

Brokers think
ConnectEast
’s acceptance of a 55¢ per share takeover offer from its largest shareholder makes sense, with an alternative bid from rival
Transurban
unlikely.

JPMorgan has downgraded its recommendation on the stock from “overweight" to “underweight" following news of the offer. The broker thinks the bid price is fair, and notes that although Transurban would be “an ideal trade buyer" of ConnectEast, it is unlikely they will pay up.

Royal Bank of Scotland notes that a successful deal for ConnectEast would have significant upside for its rivals Transurban and
MAp Group
as ConnectEast moves into the unlisted space. The broker rates both of these stocks a “buy" and likes Transurban for its growth projects.

Deutsche Bank, with a “hold" on the stock, has increased its 12-month target share price in line with the takeover offer level and believes the deal is likely to succeed.

Merrill Lynch thinks the bid is likely to succeed but is disappointed by the 55¢ offer price, expecting more of a control premium. The broker has stopped providing a rating on the stock as it is “no longer trading on fundamentals".